Section Tax 9.70 - Cigarette, and tobacco, and vapor products tax bad debt deductions(1) PURPOSE. This section clarifies when and how a person who pays cigarette taxes or a distributor who pays tobacco and vapor taxes may claim a deduction under ss. 139.362 and 139.801, Stats., for cigarette, tobacco, and vapor products tax attributable to bad debt.(2) DEFINITIONS. In this section: (a) "Bad debt" has the meaning given in ss. 139.362(1) and 139.801(1), Stats.(b) "Cigarette" has the meaning given in s. 139.30(1m), Stats.(c) "Distributor" has the meaning given in s. 139.75(4), Stats.(d) "Tobacco products" has the meaning given in s. 139.75(12), Stats.(e) "Vapor product" has the meaning given in s. 139.75(14), Stats.(3) BAD DEBTS. (a)Deduction from measure of tax. Using Form CT-117, titled "Cigarette Distributor Bad Debt Deduction for Uncollectible Wisconsin Cigarette Tax," or Form TT-117, titled "Tobacco and Vapor Products Distributor Bad Debt Deduction for Uncollectible Wisconsin Tobacco Products Tax," a person who pays cigarette taxes or a distributor who pays tobacco and vapor products taxes may claim a deduction on the monthly tax report for the cigarette, tobacco, and vapor products tax attributable to bad debt that is written off as uncollectible in their books and records and that is eligible to be deducted as bad debt under s. 166 of the Internal Revenue Code.(b)When to report the deduction. The deduction under par. (a) shall be claimed on the monthly tax report that is submitted for the month in which the amount of the deduction is written off as uncollectible and in which such amount is eligible to be deducted as a bad debt under s. 166 of the Internal Revenue Code. Example: A distributor writes off a debt attributable to tobacco products tax on September 10, 2005. At the time the debt is written off it is eligible to be deducted as a bad debt under s. 166 of the Internal Revenue Code. The distributor may claim a bad debt deduction by attaching a completed form TT-117 to the monthly tobacco products tax report filed for the month of September 2005.
(c)Recovery of bad debt. If a person who pays cigarette taxes or a distributor who pays tobacco and vapor products taxes subsequently collects in whole or in part any bad debt for which a deduction is claimed under par. (a), they shall include the amount collected in the monthly tax report filed for the month in which the amount is collected and shall pay the tax with the report.(d)Payments and credits. Payments and credits applied to a debt before it is written off as uncollectible shall be apportioned to the amount of such debt attributable to cigarette or tobacco and vapor products tax on the basis of the ratio of the cigarette or tobacco and vapor products tax to be paid per the invoice to the total amount to be paid per the invoice. The amount so apportioned shall reduce the amount of debt attributable to cigarette or tobacco and vapor products tax to arrive at the deduction under par. (a). Examples:
1) At a time when the cigarette tax rate is 12.6¢ per stick, Person A sells cigarettes to Customer B. The amount of the invoice is $20,000, consisting of cigarette tax of $5,040, cost of cigarettes of $12,000 and sundries of $2,960. Customer B defaults and discontinues operations, leaving a balance due to Person A of $2,100, which includes interest of $200 not included in the original invoice amount. The deductible tax is $478.80, computed as follows: Tax per invoice ................................... | $5,040.00 |
Invoice amount................... | $ 20,000.00 |
Unpaid invoice amount -............ | -1,900.00 |
Paid invoice amount............... | $ 18,100.00 |
Portion constituting tax* | x.252 |
Tax paid ........................................ | - $4,561.20 |
Tax that may be deducted .......................... | $ 478.80 |
*$5,040 tax ÷ $20,000 invoice amount = .252. |
2) At a time when the tobacco products tax rate is 71% of the manufacturer's established list price, Distributor A sells tobacco products to Customer B. The amount of the invoice is $11,800, consisting of tobacco products tax of $3,550, cost of tobacco products of $5,000 and sundries of $3,250. Customer B defaults and discontinues operations, leaving a balance due to Distributor A of $3,000, which includes interest of $200 not included in the original invoice amount. The deductible tax is $841, computed as follows: Tax per invoice ................................... | $3,550 |
Invoice amount................... | $11,800 |
Unpaid invoice amount -............ | -2,800 |
Paid invoice amount............... | $9,000 |
Portion constituting tax* | x.301 |
Tax paid ........................................ | - $2,709 |
Tax that may be deducted .......................... | $ 841 |
*$3,550 tax ÷ $11,800 invoice amount = .301. |
(e)Tax rate change. If the deduction under par. (a) is claimed for a month when the cigarette or tobacco products or vapor products tax rate is different from the tax rate in effect when the cigarettes, tobacco or vapor products were sold, the tax rate in effect when the cigarettes, tobacco or vapor products were sold shall be used to determine the amount of the deduction.(f)Illegal sales. No deduction under par. (a) shall be allowed for cigarette, tobacco, and vapor products tax attributable to bad debt incurred on sales of cigarettes, tobacco, or vapor products sold in violation of state or federal law. Example: Sales of banned products sold in violation of the directory of certified manufacturers and brands, s. 995.12, Stats.
Note: Section Tax 9.70 interprets ss. 139.362 and 139.801, Stats.
Wis. Admin. Code Department of Revenue Tax 9.70
CR 06-107: cr. Register April 2007 No. 616, eff. 5-1-07.Amended by, CR 22-044: am. (title), (1), cr. (2) (e), am. (3) (a), (c) to (f) Register June 2023 No. 810, eff. 7/1/2023Sections 139.362 and 139.801, Stats., were created by 2005 Wis. Act 25, and took effect on September 1, 2005.